Partner Article

Innocent businesses at risk from agency worker crackdown

Tax evasion and avoidance seemed to be in the crosshairs when the government announced that it would be introducing new rules for businesses that employ some or all of their UK workers from overseas (known as ‘offshore employment intermediaries’), but now the detail is available, it seems businesses who do not even know there is an offshore element are at risk.

The principle of the new rules is simple enough - offshore employers who supply workers to UK end users will become liable for all PAYE and NIC deductions from April 2014. But what if they don’t pay what’s due? Outside the EU, HMRC has no power.

Currently, there is no employer NIC due from an employer who has no UK or EU place of business, but both tax and NIC rules already levy a charge on UK businesses to which workers are supplied, so why are we to get yet more new legislation? Apparently, the current law is too hard to enforce, so we need new law.

From April 2014, if an offshore intermediary does not pay all the PAYE and NIC due on its UK employees’ earnings, HMRC will be able to collect the liability from a UK intermediary in the supply chain (eg, an employment agency supplying a temp) and, if that company defaults, from the end user.

What is not clear is how this is fair to intermediaries or end users who may have no idea, and no way of knowing, that a worker is ultimately employed by an offshore intermediary. It won’t be simple and it won’t be fair, but it should bring in an extra £80m–£100m pa, so that’s presumably OK.

This was posted in Bdaily's Members' News section by Baker Tilly .